Question

At the beginning of the year, manufacturing overhead for the year was estimated to be $267,500. At the end of the year, actual direct labor-hours for the year were 22,100 hours, the actual manufacturing overhead for the year was $262,500, and manufacturing overhead for the year was overapplied by $13,750. If the predetermined overhead rate is based on direct labor-hours, then the estimated direct labor-hours at the beginning of the year used in the predetermined overhead rate must have been:

Answer 1

estimated direct labor hours= 21,400 hours

Step-by-step explanation:

Giving the following information:

Estimated overhead= $267,500.

Actual direct labor hours= 22,100 hours

Actual manufacturing overhead= $262,500

Overapplied overhead= $13,750

We need to reverse engineer the allocation process of overhead costs to calculate the estimated overhead hour:

Under/over applied overhead= real overhead - allocated overhead

-13,750= 262,500 - allocated overhead

276,250= allocated overhead

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

276,250= Estimated manufacturing overhead rate*22,100

$12.5= Estimated manufacturing overhead rate

Finally, we can calculate the estimated direct labor hours:

Estimated manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

12.5= 267,500/ estimated direct labor hours

estimated direct labor hours= 21,400 hours